Lacking Medicaid Waiver, NJ Postpones Overhaul of Long-Term Care

Officials assure Assembly Budget Committee lost of anticipated savings won't lead to cuts.

Massive changes to the state's long-term care program will be delayed at least six months, as officials continue to await the federal government's approval to their request to change how nursing homes and home care are reimbursed under Medicaid. The state has asked the feds for a Comprehensive Medicaid Waiver, which will allow them to encourage more of New Jersey's elderly to remain in their homes for a longer period of time, rather than force them to move to a nursing home.

The program was initially scheduled to begin July 1, 2012, at which time 30,000 Medicaid nursing patients were to be put under a private managed-care umbrella, as opposed to directly working with the Medicaid. But state officials are now targeting January 2013 and say that even then, there may be a need to roll out the program slowly in order to ensure a smooth transition for a change of this magnitude.

Under the new program, nursing homes will negotiate their rates with the state's four managed-care providers, which include AmeriGroup and a division of Horizon Blue Cross Blue Shield of New Jersey. Valerie Harr, who oversees Medicaid in the Department of Human Services, told the Assembly Budget Committee on Wednesday that even after the switch, the state may continue to set the rates Medicaid pays nursing homes, rather than have the managed-care providers negotiate rates individually with each nursing home.

"One option would be that the state continues to set nursing home rates for two years or three years," Harr told the committee, chaired by Assemblyman Vincent Prieto (D-Hudson/Bergen). "The nursing homes would not be negotiating with the managed care plans, so there is an opportunity for a transition period. I think that is something we would want to consider."

Harr was called to testify with state Human Services Commissioner Jennifer Velez on the effect that the Medicaid waiver might have on the current state budget, which anticipates savings of $300 million by revising the Medicaid healthcare program

Velez told the committee that even though it is now eight months into the fiscal year with no waiver, she is not facing a financial crisis requiring either cuts in services to the state's nearly 1.3 million Medicaid members, or reduced payments to providers who deliver services to Medicaid beneficiaries.

Favorable revenue across the Human Services budget this year has to some extent compensated for the $300 million, Velez said.

"I think that with a quarter left in the fiscal year, I can say that our budget should come in relatively balanced," she said. "The $300 million is really absorbed in other parts of our department budget."

A slowdown this year in Medicaid enrollments by low-income New Jerseyans is helping the fiscal picture, Harr said. "When we had a downturn in the economy, we saw a spike in Medicaid enrollment, which is understandable. As the economy is improving we are starting to see the need for Medicaid services from our residents decline. So we still have increasing Medicaid enrollment, but not at the rate that we originally projected at the time we put [the current fiscal year] budget together."

The state has also seen savings by moving several Medicaid populations into managed care last October, savings that exceeded the department's estimates, Harr said.

Ken Wessel, president of the Home Care Council of New Jersey, said the state moved about 100,000 Medicaid members who receive home care into managed care. It would benefit home care providers if the nursing homes were placed under managed care sooner, rather than later, he said.

Once the managed care companies get a single "capitated" rate to care for an elderly Medicaid patient, it will be in their interest to try to care for that patient at home, where care is far less expensive than in a nursing home. "The [managed care] concept works best when it all goes together and not fragments of it," Wessel said. But currently the system is fragmented, with nursing homes outside managed care, and home care providers being paid by managed care firms.

The transition to managed care has been bumpy at times, but is improving, Wessel said. In some cases, the managed care companies identified overuse of home care services and are reducing that overutilization. In other cases, the managed care companies are increasing the use of home care providers.

Getting paid promptly has been an issue with managed care, Wessel said. "It was not ideal but it also was not a disaster," he said. "Most of the managed-care companies were very cooperative and wanted to fix it."

Paul Langevin, president of the Health Care Association of New Jersey, whose members are nursing homes and assisted living facilities, said pushing back the managed care takeover six months is a good idea. "We just saw too many steps needing to be accomplished between now and then."

Having the state continue to set rates will help the transition, he said. "While we transition to a fully managed-care market it makes sense to have a preservation of a safety net for long-term care," Langevin said.

But regardless of the reimbursement system, the biggest problem facing nursing homes is that Medicaid rates are too low, he contended.

After a $70 million Medicaid cut this year from the state, nursing homes are losing money on Medicaid patients, Langevin said. Gov. Chris Christie's proposed 2013 budget restores $10 million of the $70 million cut, but the nursing homes would still be getting paid less by Medicaid than their cost of care. In the past, the nursing homes made up the Medicaid shortfall through Medicare and private pay revenue -- but now Medicare is also being cut back.

"The acuity of the people we take care of, how sick they are, is increasing," Langevin said. He warned that if Medicaid funding cuts are not restored, "you will start seeing bankruptcies in the second half of the year."